Philippine Unemployment Rate ASEAN’s Highest, But Why?

Recent years saw rapid development in the Philippines. Strong economic growth will continue, but a high Philippine unemployment rate lingers over this sprawling Southeast Asian nation of over 100 million people.

The unemployment rate fell since 2010. The last reported figure was 5.6% during the third quarter of 2017. With that said, progress is slow and unstable. The Philippines still has the highest unemployment rate in Southeast Asia.

Many factors are causing high unemployment in the Philippines. But the main reason is because their population is growing faster than the rate jobs are created.

In three of the past five years, official statistics show the number of people entering the job market is greater than the number of jobs created.

The conundrum highlights the difficulty and complexity of spreading the benefits of economic growth. The nation’s capital of Manila prospers, but wealth hasn’t yet trickled down to poorer regions.

Filipinos Just Aren’t Working

Another reason is even more alarming. The Philippines’ working population is less compared to neighboring countries. As a result, productivity could remain low even if unemployment falls.

Labor force participation remains low. But what is it in terms of quantifiable numbers? Only about 65% of the population aged 15 and above is looking for work – one of the lowest in Asia.

To put things into perspective, the numbers in Vietnam, Thailand, and Indonesia are 78%, 72%, and 68% respectively.

Higher value placed on education in the Philippines is one possible explanation for low workforce participation.

This means young Filipinos typically spend some more time in college before entering the labor market, directly contributing to the low participation rate.

Citizens of other countries in Asia enter the workforce much earlier.

Not Enough Good Jobs in the Philippines?

Yet another alarming reason could be the low quality of jobs available. In 2014, less than half of workers – both in formal and informal employment – were in paid jobs.

Out of the rest, around 25% are self-employed with no guaranteed income. 10% work in their family business and receive food and lodging but no real cash, according to official statistics.

Former budget minister Benjamin Diokno says this large number of unpaid workers – about 4 million people – “bloat” the ranks of the employed. They make the unemployment rate seem less serious than it actually is.

However, unpaid workers are not the only ones feeling held back. 18% of workers said that they would like to work longer hours or get an extra job. Only 35% of these worked 40 hours or more a week.

The Philippine government, in an effort to mirror the success of its Asian neighbors, wants to improve the quality of jobs available. They’re doing this by ramping up employment in the manufacturing sector.

But efforts have seen little success so far. They’re hindered by issues such as higher wages, limited infrastructure, and red tape, which make the country less competitive than its ASEAN peers.

Their lack of success is proven by the fact that only 16.5% of workers were in industrial jobs in the second quarter of 2015.

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.